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National Railroad Passenger Corporation, D/B/A/ Amtrak v. the Peoples Gas Light and Coke Company et al

March 3, 2011

NATIONAL RAILROAD PASSENGER CORPORATION, D/B/A/ AMTRAK, PLAINTIFF,
v.
THE PEOPLES GAS LIGHT AND COKE COMPANY ET AL., DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

MEMORANDUM OPINION AND ORDER

Plaintiff National Railroad Passenger Corporation, d/b/a/ Amtrak ("Plaintiff" or "Amtrak") filed an eleven count Complaint for Declaratory, Injunctive and Other Relief against The Peoples Gas Light and Coke Company ("Peoples Gas"), the Illinois Department of Revenue ("Department") and its director, Brian Hamer ("Hamer"), Illinois Commerce Commission Chairman Manual Flores and Commissioners Lula M. Ford, Erin M. O'Connell-Diaz, Sherman J. Elliot and John T. Colgam (collectively, "ICC Commissioners"), the City of Chicago, and Bea Reyna-Hickey ("Reyna-Hickey"), the Director of the City of Chicago Department of Revenue (collectively, "Defendants"). Defendants have moved to dismiss Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).

BACKGROUND

In 1971, Congress enacted the Rail Passenger Service Act, 49 U.S.C. § 24301 et seq., creating Amtrak. Under the Rail Passenger Service Act, Amtrak is a private, for-profit rail carrier corporation that operates rail passenger services throughout the United States. 49 U.S.C. § 24301(a). Although it is not a department, agency or instrumentality of the United States government, see id., the Act grants Amtrak a federal tax exemption from state and local taxes, fees and charges. 49 U.S.C. § 24301(l) ("Federal Exemption Statute"). The Federal Exemption Statute provides:

Exemption From Taxes Levied After September 30, 1981.

(1) In general. Amtrak, a rail carrier subsidiary of Amtrak, and any passenger or other customer of Amtrak or such subsidiary, are exempt from a tax, fee, head charge, or other charge, imposed or levied by a State, political subdivision, or local taxing authority on Amtrak, a rail carrier subsidiary of Amtrak, or on persons traveling in intercity rail passenger transportation or on mail or express transportation provided by Amtrak or such a subsidiary, or on the carriage of such persons, mail, or express, or on the sale of any such transportation, or on the gross receipts derived therefrom after September 30, 1981. In the case of a tax or fee that Amtrak was required to pay as of September 10, 1982, Amtrak is not exempt from such tax or fee if it was assessed before April 1, 1997.

(2) The district courts of the United States have original jurisdiction over a civil action Amtrak brings to enforce this subsection and may grant equitable or declaratory relief requested by Amtrak.

In Illinois, Amtrak purchases services from Peoples Gas related to the delivery of natural gas, and Amtrak pays a price for those services. Amtrak alleges that among the costs Peoples Gas charges its customers are certain taxes and charges from which Amtrak claims it is exempt under the Federal Exemption Statute. Amtrak brings the present action to declare and enforce its rights under the Federal Exemption Statute with regard to those taxes and charges. Because the Federal Exemption Statute prohibits the imposition of taxes, fees, and charges "imposed or levied by a State, political subdivision, or local taxing authority on Amtrak," a review of each Defendant's status, and of the precise taxes and charges at issue in this case, is necessary.

I. Defendants

A. Peoples Gas

Peoples Gas is a regulated Illinois public utility, principally engaged in the distribution, supply, furnishing, sale, transportation and delivery of natural gas to Illinois consumers. (R. 1, Compl. ¶ 3.) Amtrak purchases deliveries of natural gas from Peoples Gas for use in its interstate rail carriage business. (Id. at ¶ 19.)

B. State Defendants

1. Illinois Department of Revenue & Director Hamer

The Illinois Department of Revenue is an agency of the State of Illinois Executive Department. (Id. at ¶ 5.) The Department administers Illinois revenue laws, including the Gas Use Tax Law, 35 ILCS 175/5-1 et seq., and the Gas Revenue Tax Act, 35 ILCS 615/1 et seq. (Id. at ¶ 4.) Defendant Hamer is the current Director of the Illinois Department of Revenue. Hamer oversees the Department, and is charged with administering and enforcing many of the revenue laws of the State of Illinois. (Id. at ¶ 6.)

2. Illinois Commerce Commission and the Commissioners

The Illinois Commerce Commission ("ICC") administers the Illinois Public Utilities Act. (Id. at ¶ 7.) The ICC is charged with assessing the Public Utility Fund Tax, which is imposed on Illinois public utilities pursuant to 220 ILCS 5/2-202. Public utilities may recoup their Public Utility Fund Tax expenditures from their customers in accordance with 220 ILCS 5/9-222. The Defendant Commissioners oversee the ICC and administer and enforce the Public Utilities Act. (Id. at ¶ 8.)

C. City Defendants

Defendant City of Chicago ("City") is a municipal corporation. (Id. at ¶ 9.) Pursuant to the Municipal Code of Chicago § 3-40-040, the City collects a tax imposed on all persons engaged in the business of distributing, supplying, furnishing or selling gas for use or consumption within the corporate limits of Chicago. (Id.) Defendant Bea Reyna-Hickey ("Reyna-Hickey") is the current Director of the City of Chicago Department of Revenue. (Id. at

¶ 10.) In that capacity, Reyna-Hickey oversees the City Department of Revenue, and is charged with the duty of administering and enforcing many of the City's revenue laws. (Id.)

II. Taxes, Fees & Charges At Issue In This Lawsuit

A. Illinois Gas Use Tax

The Illinois gas use tax is a state tax imposed on gas purchasers.*fn1 The Illinois Gas Use Tax Law, 35 ILCS 173/5-1 et seq., provides that, as of October 1, 2003, purchasers in the State of Illinois that obtain gas from out-of-state for use in Illinois must pay a state "gas use" tax. 35 ILCS 173/5-10. The tax imposed is the lesser of 2.4 cents per therm or five percent (5%) of the purchase price for the billing period. Id. Purchasers can opt to pay the gas use tax in one of two ways: (1) by registering with the Illinois Department of Revenue as a "self-assessing purchaser" and, in so doing, paying the gas use tax directly to the Department at the self-assessing purchaser rate, see 35 ILCS 173/5-20; or (2) by electing to pay the "alternate tax rate" of 2.4 cents per therm to a delivering supplier, who shall then owe the Department a debt in the amount of the tax collected, see 35 ILCS 173/5-15. The delivering supplier "shall collect [the gas use tax] from the purchasers who have elected the alternate tax rate" until it receives either a copy of the purchaser's certificate of registration as a self-assessing purchaser, see id., or a certificate of exemption stating that the customer is exempt from the gas use tax, see 96 Ill. Admin. Code § 471.125(b). Receipt of either certificate "relieve[s the delivering supplier] of the duty to collect the alternate tax." 35 ILCS 173/5-15. Pursuant to the Gas Use Tax Law, the gas use tax shall not be imposed on "[a]ny purchase by a purchaser if the supplier is prohibited by federal or State constitution, treaty, convention, statute, or court decision from recovering the related tax liability from such purchaser." 35 ILCS 173/5-5.

B. Illinois Gas Revenue Tax

The Illinois gas revenue tax is a state tax imposed on gas distributers, suppliers, and sellers. Pursuant to the Gas Revenue Tax Act, 35 ILCS 615/1 et seq., "[a] tax is imposed upon persons engaged in the business of distributing, supplying, or furnishing or reselling gas . . . at the rate of 2.4 cents per therm . . . or 5% of the gross receipts received from each customer from such business, whichever is the lower rate." 35 ILCS 615/2. The statute provides that "gross receipts" shall not include receipts from "any sale to a customer if the taxpayer [i.e., the utility] is prohibited by federal or State constitution, treaty, convention, statute or court decision from recovering the related tax liability from such customer." 35 ILCS 615/1(viii).

C. Illinois Public Utility Fund Tax

The Illinois Public Utilities Act, 220 ILCS 5/2-100 et seq., imposes a tax on public utilities in Illinois in the form of a tax on their gross revenue, for the purpose of "maintain[ing] and foster[ing] the effective regulation of public utilities." 220 ILCS 5/2-202(a).

D. City of Chicago Municipal Tax

The City of Chicago imposes a tax on "all persons engaged in the business of distributing, supplying, furnishing or selling gas for use or consumption within the corporate limits of the city" at a rate of eight percent (8%) of gross receipts from the company's business. City of Chicago Municipal Code § 3-40-040.

III. Public Utilities Act "Pass-Thru"

The Public Utilities Act, 220 ILCS 5/9-222, provides as follows: Whenever a tax is imposed upon a public utility engaged in the business of distributing, supplying, furnishing, or selling gas for use or consumption pursuant to Section 2 of the Gas Revenue Tax Act, . . . or whenever a tax is imposed upon a public utility pursuant to Section 2-202 of this Act, such utility may charge its customers, . . . an additional charge equal to the total amount of such taxes. . . . Such utility shall file with the Commission a supplemental schedule which shall specify such additional charge and ...


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